How increasing oil exports hurts the manufacturing sector
Retired Professor of Economics Reimar Kroecher recently wrote me this e-mail:
If Enbridge gets permission to build its pipeline from the Tar Sands to Kitimat, and the volume of oil exported from Canada rises dramatically, there will be a substantial increase in the Canadian dollar relative to the U.S. dollar and other currencies. In the economic literature this effect is sometimes referred to as the Dutch disease. When the Netherlands started exporting high volumes of newly found natural gas, the Dutch currency appreciated substantially [hurting the manufacturing sector]. Norway also had the same experience when it revved up its exports of hydrocarbons.
Kroecher’s e-mail raises a point that effectively challenges the argument Prime Minister Stephen Harper and the oil industry like to make – that sending unrefined Canadian oil to Asia is self-evidently good for our economy. It is not. As with any decision, there would be winners and losers.
Obvious losers would include Canada’s retail and manufacturing sector, which suffer as the Canadian dollar tracks the price of oil. A premium on the Canadian dollar has a devastating effect on Canadian manufacturers – 627,000 manufacturing jobs have been lost in recent years, according to one measure. One economist at the University of Ottawa has estimated that 42 per cent of manufacturing job losses in recent years are linked to Canada’s rising oil exports. This only gets worse the more oil Canada exports.
Another loser would be our coastal seafood and marine recreation sectors, which could be devastated by a large oil spill and together employ approximately 45,000 people. Oil interests might argue that each extra barrel dug up or steamed out creates “jobs jobs jobs,” but as Andrew Leach satirically points out, such claims don’t hold much water, or oil.
The winners would be the companies that dig and steam oil out of the ground in Alberta, many of whom are substantially or wholly owned by foreign interests such as China’s state-owned oil company Sinopec and Petrochina. More than 35 per cent of oil and gas extraction and support in Canada is foreign controlled and four of the five richest companies in the world are non-Canadian oil companies with operations in the oilsands.
Kroecher’s e-mail concludes: I want to urge you to add your voice to those Canadians who are attempting to prevent this pipeline from being built.
It may seem difficult to hold back the most powerful industry in the world, and the politicians who back them. Difficult, yes, but it’s not impossible. We are the majority, after all.
Track our progress at www.notankers.ca and sign the petition to grow our network and our power.